Thousands march in Rio over oil dispute, pressuring Rousseff

RIO DE JANEIRO, Brazil (Reuters) - As many as 200,000 people demonstrated in Rio de Janeiro on Monday to urge Brazilian President Dilma Rousseff to veto a bill that local officials say could cost Rio state billions of dollars in lost oil revenue and cripple plans to host the World Cup and Olympics.

Late Monday, a person familiar with the president's plans said Rousseff is indeed planning to veto at least part of the bill, particularly a portion that redefines royalty payments for existing oil production in Brazil.

The president, the person added, instead will propose that Rio and Espirito Santo, the two states with most of Brazil's existing oil output, continue to get a level of royalties from current production similar to what they received last year. The partial veto would not change parts of the bill that redefine oil royalties from production at new fields.

For Rousseff, the protest raised the stakes on what may be the most sensitive decision she has faced in her nearly two-year-old government: How to distribute tens of billions of dollars in expected revenues from a massive offshore oil find that Brazil discovered in 2007.

The bill, passed by Congress this month, would spread the windfall more evenly to Brazil's 26 states and federal district. As submitted for her approval, however, it would also alter royalties on existing production, angering Rio and other southeastern states where most of Brazil's oil is located.

Rousseff has until Friday to veto the bill, but is expected to decide on the partial veto on Thursday, the person said.

Monday's event by early evening had attracted about 200,000 demonstrators, according to police calculations.

The protest began with a march through Rio's colonial center and was followed by a series of speeches, concerts, and impromptu revelry that at times gave it a festive air. In recent days, state officials plastered streets and buildings with banners advertising the protest in large black and white lettering and a command in red for the president: "Veto, Dilma."
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